Commercial Real Estate Edmonton (2022 Report)

Industrial and multi-unit asset classes dominated transactions of commercial real estate in Edmonton and the surrounding areas in 2021, and the trend is likely to continue in the year ahead as both local and multi-national companies seek to expand their presence in Northern Alberta. This, according to the 2022 Commercial Real Estate Report from RE/MAX Canada.

Close to 250 industrial sales with a total value of $892 million occurred in 2021*, including multi-bay, single tenant, owner-user and condominium properties, an increase of 25 per cent over the previous year’s sales. Dollar volume has soared almost 80 per cent during the same period. Amazon’s construction of a 2.9-million-square-foot facility in Acheson speaks to the Edmonton region’s appeal on a national stage. Industrial projects under construction in Edmonton are at a seven-year high and tight market conditions exist in terms of absorption. Developers such as Remington and Panattoni are moving as fast as they can to meet demand, but they can’t build fast enough. Limited product is making it virtually impossible, given current challenges in terms of inflationary pressure on construction costs and disruptions to the supply chain.

Affordability has been a major driver in Edmonton’s commercial market, with attractive land values spurring demand from both local developers and out-of-province investors, despite a serious inventory crunch. Edmonton’s cost per acre is a fraction of the value for a similar property in neighbouring B.C. or Ontario. 

Multi-unit residential is following the same wave, with 19 sales valued at $160 million** occurring in the first quarter of 2022. Affordable housing incentives put in place by CMHC—such as a 50-year amortization period, low loan-to-value ratios, and relatively favourable interest rates—have buoyed sales of residential land and infill for purpose-built rental accommodations. In 2021, 74 apartments were sold at a value of $596 million compared to 50 apartments valued at $571 million one year earlier. 

While demand for retail remains soft in the downtown core, increased traffic and a return to the office should improve this segment of the market throughout the remainder of the year. Weaknesses characteristic of these asset classes in 2020/2021, brought on by stringent Covid rules and regulations, are likely to resolve once the pandemic is truly in the rear-view mirror.

Commercial condominiums remained a strong asset class across the industrial, office and retail sectors in Edmonton. Sales rose year-over-year in all three sectors, with the greatest gain of 45 per cent realized in industrial condominiums, followed by office condos at almost 12 per cent, and retail units at just over 10 per cent. Low interest rates were the strongest impetus in 2021, prompting many owner/users to lock into condo ownership. 

Alberta’s strong economic forecast, at 5.8 per cent, is expected to lead the country in terms of GDP growth in 2022. According to RBC Economics’ Provincial Outlook, released in March 2022, the surge in commodity prices is expected to benefit Western Canada throughout the year, given recent geopolitical events. With the price of oil now hovering at $100 USD per barrel, the province is set to experience the strongest rate of expansion since 2011. Economic growth should further bolster commercial activity in all asset classes this year. The Edmonton Region Real Estate Investment Sales Summary reported close to 650 commercial sales in 2021, an increase of almost 13 per cent over 2020 levels, while dollar volume rose to almost $2.4 billion, up nine per cent from just over $2.2 billion. Given the significant economic recovery currently underway in the province, Edmonton’s commercial market is poised for substantial growth in the
year ahead. 

*Edmonton Region Real Estate Investment Sales Summary

**The Network 

National Commercial Real Estate Highlights

With North American stock markets dangerously close to correction, bricks-and-mortar commercial real estate continues to resonate with institutional and private investors, particularly those who are personally vested, across almost every commercial asset class in major Canadian centres, say RE/MAX brokers.

The RE/MAX Canada 2022 Commercial Real Estate Report found demand for industrial, multi-unit residential—particularly purpose-built rentals—and farmland was unprecedented in the first quarter of 2022, with values hitting record levels, while retail and office are starting to show signs of growth in multiple markets.

The report examined 12 major Canadian centres from Metro Vancouver to St. John’s. Regional highlights include the following:

• 92 per cent of markets surveyed (11/12) reported extremely tight market conditions for industrial product in the first quarter of 2022. Newfoundland-Labrador was the only outlier.
• 67 per cent of markets surveyed (8/12) found challenges leasing industrial space. Included in the mix were Vancouver, Edmonton, Calgary, Winnipeg, Ottawa, the Greater Toronto Area, Hamilton-Burlington-Niagara and London. Some realtors are recommending tenants start their search for new premises at least 18 months before their current leases come up for renegotiation.
• While demand for overall office space in the core remains relatively soft in 92 per cent of markets (11/12) across the country, Metro Vancouver continues to buck the trend.
• Suburban office space continues to prove exceptionally resilient in 67 per cent of markets surveyed (8/12). Those markets include Vancouver, Calgary, Saskatoon, Winnipeg, Hamilton-Burlington-Niagara, Ottawa, Halifax-Dartmouth and Newfoundland-Labrador.
• Development land remained sought after (industrial/residential) in 67 per cent of markets surveyed (8/12) including Vancouver, Calgary, Regina, Saskatoon, Winnipeg, Ottawa, the Greater Toronto Area and Halifax-Dartmouth.
• End users are encountering challenges in terms of expanding their businesses due to land constraints/shortages, with specific mentions of this noted in Vancouver, the Greater Toronto Area and Regina.
• Retail is on the rebound in 75 per cent of major Canadian markets (9/12), with strong emphasis on prime locations in neighbourhood microcosms. The trend has been identified in Vancouver, Edmonton, Calgary, Saskatoon, Regina, Winnipeg, Hamilton-Burlington-Niagara, Toronto and Ottawa.